Investor update Q1 2017 April 19, 2017
Questions
Conclusion
Financial review
Operational review
Q1 2017
Agenda
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Record profitability in Q1 2017
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Significant progress continues
EBIT up 13% overall
and in all Business
Areas
Revenue up 7% overall
and in all Business
Areas
Record Q1 EBIT, ROS and ROI
Volumes
Up 4%
Share repurchase program in progress
2% revenue development
on acquisitions
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Investor update | Q1 2017 Q1 2017
Record profitability in Q1 2017
Revenue
(€ million)
Moving average
ROI %**
EBIT* (€ million) ROS %**
Q1 2017
3,661
Q1 2016
3,430
334 376
Q1 2017 Q1 2016
15.2
Q1 2017 Q1 2016
14.5
Q1 2017
10.3
Q1 2016
9.7
*EBIT = Operating income excluding identified items **ROS% = EBIT/revenue and Moving average ROI (in %) = 12 months EBIT/12 months average invested capital
Q1 2017 Q1 2016
-336 -287
Net cash from
operating activities
5
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Revenue and EBIT up in all Business Areas
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Revenue up, mainly due to higher volumes
Investor update | Q1 2017
€ million Q1 2016 Q1 2017 Δ%
Revenue 3,430 3,661 7
EBIT (Operating income excluding identified items) 334 376 13
Operating income 357 376 5
Ratio, % Q1 2016 Q1 2017
ROS* 9.7 10.3
Moving average ROI* 14.5 15.2
Increase
Decrease
Revenue development Q1 2017
-4 -2
Operational review
*ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital
-3 -2
7
2
72
4
Price/Mix
-1
Volume Total Exchange rates Acquisitions/Divestments
Announced an ambition to use
100% renewable energy and
become carbon neutral by
2050
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Investor update | Q1 2017
Decorative Paints Performance Coatings Specialty Chemicals
Volume growth overall, driven by Decorative Paints and Specialty Chemicals
AkzoNobel
2 2
-2-1
Quarterly volume development in % year-on-year
Quarterly price/mix development in % year-on-year
-2 -2-1-1
-4
-2
0
2
-3 -1
-2 -2-3
-1
-4-3 -3
-4
4
11
5
2 21
4
-2-3
-2-2-1
6
3 2
9
-4
-2
0
2
4
6
8
10
1
Operational review
2016
2017
8
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Partnership between AkzoNobel
and peace movement
MasterPeace to color 100 “Walls
of Connection”
Decorative Paints Q1 2017: Positive volumes in all regions
Investor update | Q1 2017
€ million Q1 2016 Q1 2017 Δ%
Revenue 861 922 7
EBIT (Operating income excluding identified items) 52 77 48
Operating income 52 77 48
Ratio, % Q1 2016 Q1 2017
ROS* 6.0 8.4
Moving average ROI* 12.0 13.8
Revenue development Q1 2017 Increase
Decrease
-5
3
-3
*ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital
Operational review
79
Exchange rates
1
Acquisitions/Divestments
0
Price/Mix
-3
Volume Total
9
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Performance Coatings Q1 2017: Growth across a number of segments
Investor update | Q1 2017
Increase
Decrease
Revenue development Q1 2017
€ million Q1 2016 Q1 2017 Δ%
Revenue 1,388 1,471 6
EBIT (Operating income excluding identified items) 186 187 1
Operating income 186 187 1
Ratio, % Q1 2016 Q1 2017
ROS* 13.4 12.7
Moving average ROI* 30.4 28.6
-6 -2
-2
*ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital
Operational review
62
Total Exchange rates Acquisitions/Divestments
5
Price/Mix
-1 Volume
0
10
A new research and
innovation hub opened in
Felling, UK
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Specialty Chemicals Q1 2017: Volumes up in all business units and regions
Investor update | Q1 2017
Increase
Decrease
Revenue development Q1 2017
€ million Q1 2016 Q1 2017 Δ%
Revenue 1,206 1,289 7
EBIT (Operating income excluding identified items) 164 176 7
Operating income 164 176 7
Ratio, % Q1 2016 Q1 2017
ROS* 13.6 13.7
Moving average ROI* 16.5 18.1
-3
-1 -3
*ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital
Operational review
7
2
5
Price/Mix Volume Acquisitions/Divestments Exchange rates Total
11
Imagine Chemistry initiative
generated 200 innovative ideas
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Strong financial foundation for growth and value creation
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Free cash flow continues to improve
Investor update | Q1 2017
€ million
Q1 2016 Q1 2017
EBITDA 487 534
Interest paid -4 -4
Tax paid -37 -88
Changes in working capital, provision* and other -538 -517
Capital expenditures (including intangible assets) -125 -128
Free cash flow, excluding pension top-up payments -217 -203
Pension top-up payments -245 -212
Free cash flow (from operations) -462 -415
Financial review
*Provisions include recurring pension contributions Free cash flow (from operations) = Net cash from operating activities minus Capital expenditures and Investment in intangibles
13
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Investor update | Q1 2017
IAS19 pension deficit €0.7 billion
Key pension financial assumptions Q1 2016 Q1 2017
Discount rate 2.4% 2.4%
Inflation rate 3.0% 3.1%
233
266
Other
(694)
Deficit end
Q1 2017
(35)
UK Buy-in
(49)
Asset return
over P &L
Inflation
on DBO
77
Discount
rates on DBO
(196)
Top-ups
Deficit end
Q4 2016
(990)
Pension deficit development in Q1 2017
€ million Decrease Increase
Financial review 14
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Investor update | Q1 2017
Further de-risking of pension liabilities including £0.3 billion non-cash buy-ins*
Various activities to reduce liabilities
£8.7 billion insurance buy-ins for UK schemes (2014-17). $0.7 billion buy-out relate to a US scheme (2013)
Active management of interest rate and inflation exposure, with around 80 percent of overall defined benefit obligation risks hedged
Almost 60 percent of longevity risk is covered by insurance contracts and hedging
Financial topics
80
6061
21
16
Longevity hedging Interest and
inflation hedging
Defined benefit
obligations
100 2
Other post-retirement benefits
ICI PF UK
Other pension plans
CPS UK
*Total year to date March 2017
15
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Investor update | Q1 2017
Concluding remarks
16
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AkzoNobel and leading global container shipping company Maersk Line signed a
strategic sustainability partnership to reduce carbon emissions per container
shipped by 10%
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More than 200 children in Egypt’s 6th of October City benefited from a major
renovation of their school’s facilities, organized as part of our Human Cities initiative
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Safety in the marine industry to be improved after AkzoNobel, oil and gas tanker
operator Barrier Group and DroneOps joined forces to develop a drone capable of
remotely inspecting enclosed spaces and ballast water tanks
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Significant progress continues
Improvement program on
track (deliver €100 - 200
million savings)
EBIT up 13% overall
and in all Business
Areas
Revenue up 7% overall
and in all Business
Areas
Record Q1 EBIT, ROS and ROI
Share repurchase
program executed
2% revenue development
on acquisitions
Volumes up 4%
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Outlook
We expect EBIT for 2017 to be around €100 million higher than 2016,
as a result of growth momentum and continuous improvement,
assuming no material change in market and economic dynamics.
We continue to anticipate positive developments for EMEA, North America and Asia,
improving during the year, while Latin America is expected to stabilize. Market trends
experienced in the second part of 2016, including for the marine and oil and gas
industries, are expected to continue during the first half of 2017.
We have structurally improved our ability to respond to developments in our markets
and continue taking appropriate measures to deal with higher raw material prices in
an inflationary environment.
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Safe Harbor Statement
This presentation contains statements which address such key issues as
AkzoNobel’s growth strategy, future financial results, market positions, product development, products in
the pipeline, and product approvals. Such statements should be carefully considered, and it should be
understood that many factors could cause forecasted and actual results to differ from these statements.
These factors include, but are not limited to, price fluctuations, currency fluctuations, developments in raw
material and personnel costs, pensions, physical and environmental risks, legal issues, and legislative,
fiscal, and other regulatory measures. Stated competitive positions are based on management estimates
supported by information provided by specialized external agencies. For a more comprehensive discussion
of the risk factors affecting our business please see our latest Annual Report, a copy of which can be found
on the company’s corporate website www.akzonobel.com.
Investor update | Q1 2017 22
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